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Play Updates, Tuesday, 11/22/2005

In Play Updates and Reviews

by OI Staff

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Call Updates

Amerada Hess - AHC - close: 132.71 chg: +2.31 stop: 124.49 *new*

Another strong day for oil stocks helped propel AHC to a new two-month high over early November resistance near $131.50. Today's 1.7% gain in AHC may have also been fueled by news that the company had reached an agreement with the New Jersey Attorney General over an alleged violation for raising gasoline prices too fast. We are going to raise our stop loss to $124.49. Our seven-week target is the $139.85-140.00 range.

APA also benefited from the rise in oil prices and strength in the sector. Shares of APA broke out over technical resistance at its simple 100-dma. The stock also traded at and above our trigger to buy calls at $69.05 opening the play. Our target is the $75-76 range by year-end.

Tuesday proved to be a quiet session for HOV until a late day surge pushed the stock higher. There was a sharp rise in volume to accompany the late afternoon gains (see an intraday chart) and HOV extended its bullish breakout. Our target is the $54.50-55.00 range. We do not plan on holding past HOV's earnings report.

PD is still consolidating under the $130 level. We would not consider new bullish positions until PD trades back above $130.00 or even $131 depending on your own risk profile. Our target is the $139.90-140.00 range. The Point & Figure chart for PD points to a $150.00 target. More conservative traders may want to target the October high near $138.50.

The relative weakness in ROK has now made it two days in a row. This is not a good sign and we will strongly consider exiting early if shares trade under the $56.26-56.00 range. We are not suggesting new plays.

The rally in WLT paused a bit on Tuesday but the stock closed up off its lows of the session. We see no changes from our previous update. Our target is the $57-58 range by December 31st. More conservative traders can aim for an exit near $55.

Put Updates

None

Strangle Updates

(What is a strangle? It's when a trader buys an out-of-the-money (OTM) call and an OTM put on the same stock. The strategy is neutral. You do not care what direction the stock moves as long as the move is big enough to make your investment profitable.)

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AmerisourceBergen - ABC - cls: 79.25 chg: +0.35 stop: n/a

We see no changes from our previous update on ABC. The stock is nearing round-number resistance at the $80.00 mark. We are not suggesting new strangle positions. Our current strangle involves the December $80 calls (ABC-LP) and the December $70 puts (ABC-XN). Our estimated cost was $2.80. Our current target is for a rise to $5.00 in the strangle.

AEOS has continued to bounce and the stock has now filled the gap down from its earnings report. At this time we're not suggesting new strangle positions. The current strangle has an estimated cost of $2.35 with the January $27.50 calls (AQU-AY) and the January $22.50 puts (AQU-MX). We are targeting a rise to $4.70.

ANF posted another strong session up 1.68%. We would not be surprised by a dip back toward the $60 level before moving much higher. We are not suggesting new strangle positions at this time. The options in our strangle are the January $65 calls (ANF-AM) and the January $55 puts (ANF-MK). Our estimated cost was $5.15. We're looking for a rise to $8.50.

CME saw some profit taking this morning with a dip to $377 but the stock rebounded to close with a minor loss. We're not suggesting new strangle positions at this time. Our current play involves the January $400 calls (CMJ-AK) and the January $350 puts (CMJ-MA). Our estimated cost was $26.70. We're aiming for a rise to $40.00 in the strangle before January options expire.

DHI shows a similar pattern to HOV. Both stocks had a quiet session until a sudden spike higher in the last couple of hours of trading. We are not suggesting new strangles at this time. Our current play involves the January $35 calls (DHI-AG) and the January $30 puts (DHI-MF). Our estimated cost was $3.15. We're aiming for a rise to $6.00.

We see no changes from our previous update on FS. We are not suggesting new strangles at this time. The options in our strangle were the January $60 calls (FS-AL) and the January $50 puts (FS-MJ). Our estimated cost was about $2.60. We're aiming for a rise to $5.00 or more.

Wow! Could this be the beginning of something more substantial? HTCH spiked higher to close with a 5.6% gain on above average volume. We were close to bailing out of the play for lack of movement. Now we just need to see some follow through on today's breakout! We are not suggesting new strangles at this time. The options in our strangle were the January $30 calls (UTQ-AF) and the January $20 puts (UTQ-MD). Our estimated cost was $1.65. We have adjusted our initial target from $3.00 to breakeven at $1.65 since the post-earnings reaction was not as big as expected.

We see no changes from our previous updates on LEA. We are no longer suggesting new strangle positions. The options in our strangle are the January $35 calls (LEA-AG) and the January $25 puts (LEA-ME). We are targeting a rise to $3.20 or more.

Hmm... the relative weakness in LTR these last two sessions is not a good sign for the bulls. This stall in its upward momentum is turning the technical indicators closer to a bearish signal. Volume was pretty strong for pre-holiday trading session and bears might point to that as distribution (a.k.a. someone is selling and getting out). More conservative traders might want to think about an early exit right here. We're going to keep the play open since there are still more than three weeks left before December expiration. The options in our strategy are the December $95 calls (LTR-LS) and the December $85 puts (LTR-XQ). Our estimated cost is about $3.05. We plan to exit if our strangle rises to $5.00 or if shares of LTR hit 99.90.

PAY is showing more relative weakness and the technicals are suggesting that PAY will continue lower. Watch for a retest of support near $22.00. We are not suggesting new strangle positions. Our remaining strangle involves the January $22.50 calls (PAY-AX) and the January $17.50 puts (PAY-MW). Our estimated cost was $2.60 and we're aiming for a rise to $4.50 or more.

We see no changes from our previous update on PDLI. We are not suggesting new strangle positions. The options in our strangle are the December $30 calls (PQI-LF) and the December $25 puts (PQI-XE). Our estimated cost was at $1.80. We'll plan to sell if either side rises to $3.25.

We see no changes from our previous update on SPC. We are not suggesting new strangle positions at this time. Our estimated cost for this strangle was $1.25. The options in our suggested strangle are the December $22.50 calls (SPC-LX) and the December $17.50 puts (SPC-XW). We are aiming for a rise to $2.50 or more.

STR produced a minor bullish reversal today but the stock remains in its sideways trading pattern. Our suggested entry window for strangles was the $75.50-77.00 (the closer to $75.00 the better) range so we're not suggesting new plays at this time. Our strangle involves the January $80 calls (STR-AP) and the January $70 puts (STR-MN). Our estimated cost was $5.10 and we're aiming for a rise to $9.50 or more.

A big day for oil stocks pushed VLO to a 3.4% gain. Today's rally could be the end of its recent consolidation pattern. Unfortunately, we are still on the sidelines. Our suggested entry window was $98.50-100.00. Shares of VLO gapped up to open at $100.15 and the intraday low was $100.06 so we remain spectators. We're going to keep the play open as a candidate but we're going to adjust our entry window to $101.00-99.00. If VLO dips back into this new entry window we'd open strangles. We're suggesting the January $110 calls (VLO-AB) and the January $90 puts (VLO-MR). At current prices this would cost about $5.85 but wait for shares to enter our $99-101 entry window. We'll aim for a rise to $9.50 in the strangle. Post split that target will change to $4.75 as our cost will adjust to $2.825. That's right, VLO will split 2-for-1 in December.

Dropped Calls

Intel Corp. - INTC - close: 26.16 chg: +0.91 stop: 23.45

Target achieved. An upgrade for new partner Micron (MU) pushed the SOX semiconductor higher and shares of Intel helped lead the rally. INTC spiked higher from the start and closed with a 3.6% gain on big volume. Our target has been the $26.00-26.50 range. More aggressive traders may want to keep the play open and ride INTC into the second half of December.